Investor sentiment in Birmingham improves

Despite a softening of secondary yields, prime office yields in Birmingham stabilised at seven per cent during the first six months of 2009, according to CB Richard Ellis’ recent Birmingham Offices Market View. 

The report found that transactional volumes remained relatively low during the first half of 2009, with £62m of central business district transactions taking place in three deals.  The most notable transaction was the sale of 5 St Philips Place in February to Climate Change Capital for £31.5m, reflecting a net initial yield of 6.95 per cent.  Located on the corner of Colmore Row and St Philips Square, the building was majority let to the Secretary of State for a further 12 years with M&S, HBOS and HSBC occupying the ground floor. 

Availability of ready-to-occupy space in Birmingham now stands at 2.4m sq. ft. following the completion of a number of developments during the first half of 2009.  Although development completions pushed up supply of ready-to-occupy space, it heralds the peak of the current development cycle.

Ashley Hancox, senior director in the office agency team at CBRE in Birmingham, said:  “Despite a shortage of investment product, investor sentiment has improved considerably over recent months, particularly for the prime and long dated income sector of the market.  A raft of new buyers including syndicates, overseas and high net worth individuals and funds with improved liquidity levels are now once again showing an appetite for reinvesting.” 

Take-up of new Grade A spaces in central Birmingham during 2009 so far included the Highways Agency relocation from Five Ways to The Cube where it took 55,900 sq ft at £25.00 per sq. ft.

Total take-up in 2009 in the central Birmingham market, as defined by Birmingham Office Market Forum (BOMF), totaled 197,100 sq. ft. across 40 deals.  This is a significant drop from the previous year and below the average half-year take-up of 311,00 sq. ft.

Ashley Hancox said: “Take-up in Birmingham in 2008 was the highest on record.  However, this is unlikely to be repeated in 2009 as the occupational market becomes increasingly challenging.  In spite of this, rental values on the best space in a prime location are likely to hold firm.”

Working off a peak of £32.00 per sq. ft, rents are believed to have fallen by just under ten per cent to around £29.00 per sq.ft.  Incentive packages on the market include two years rent free for large transactions with commitments of five years or more. 

ENDS

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